Spousal RRSPs can be useful for higher earners to smooth out income when there’s a serious mismatch in assets or investments.Edwin Tan/iStockPhoto / Getty Images
There’s a perception that spousal registered retirement savings plans (RRSPs) have dwindled in importance over the years because of couples’ ability to split up to 50 per cent of income from pensions and registered retirement income funds (RRIFs).
However, spousal RRSPs can still be useful for higher earners when there’s a serious mismatch in assets or investments and the income generated is claimable solely on one spouse’s tax return.
Here’s an example of how that lopsided income can result in additional taxes paid.
A husband and wife – let’s call them Aravind and Mikayla – are both 65 years old in January, 2026, and have the following annual income that can be split:
an RRSP totalling $1.5-million in Mikayla’s name that she’s converting to a RRIF, with a theoretical long-term annual withdrawal amount of $60,000 based on market assumptions and the RRIF minimum withdrawal of 4 per cent at the age of 65;maximum CPP for both her and Aravind of $1,507.65 monthly, for a total of $18,091.80 each a year; andmaximum OAS of $742.31 monthly for an annual total of $8,907.72 each.
With the RRIF income split evenly ($30,000 each), this would result in Aravind and Mikayla each claiming a total income of $56,999.52 for taxes owing of $8,027 in Ontario. That leaves each of them with $48,972.52 of after-tax spending. (For simplicity, this calculation does not include additional credits to which they might be entitled.)
But what if Mikayla had additional income of $60,000 that couldn’t be split with Aravind? There are several reasons this could occur, including:
payout to the owner of a corporation in which one spouse wasn’t involved;rental properties held in one spouse’s name;income out of a family trust that’s payable to one spouse only;a retirement compensation arrangement that specifically doesn’t allow income-splitting in retirement;income from non-registered investments held in one spouse’s name; oran inheritance a spouse is protecting by keeping separate in the event of a divorce.
Adding $60,000 of income to Mikayla’s tax return results in a total income of $116,999.52
That means her OAS is clawed back at a rate of 15 per cent on income above $95,323, for a reduction of $3,251.48.
Her 2026 tax return would show the following:
Total income: $116,999.52OAS clawback: $3,251.48 Net taxable income: $113,748.04 (OAS clawback functions as both a deduction on the tax return as well as an additional tax payable.)Taxes owed: $25,319, and the OAS clawback of $3,251.48After-tax income: $85,177.56
Combined with Aravind’s income of $48,972.52, the couple’s after-tax total is $134,150.08.
The income mismatch means Mikayla has a lot of income taxed at higher rates, and her OAS is in clawback territory.
Because the RRSP started in Mikayla’s name, she can only split up to 50 per cent of the income from the converted RRIF with Aravind, or a maximum of $30,000.
What if she had contributed to a spousal RRSP instead?
Although there are other ways to reduce the impact of her additional income, those solutions often require additional planning or complexity. The spousal RRSP, on the other hand, is simple.
Aravind would own the spousal RRSP and, at retirement, the income from minimum RRIF withdrawals would be his.
That means Aravind and Mikayla each have their CPP, OAS and $60,000 of additional income for a total of $86,999.52.
That will increase Aravind’s taxes owing from $8,027 to $16,822. In return, Mikayla’s taxes are reduced from $25,319 to $16,822 and her OAS isn’t clawed back.
The net result is an after-tax total of $140,355.04 after using a spousal RRSP – or $6,204.96 more than with the regular RRSP.
While this amount alone is worth strategizing over, the real impact is in cases in which this mismatch in income and taxes will happen repeatedly.
Being able to equalize this taxable income could result in hundreds of thousands of dollars of tax savings over an entire retirement – all by the perfectly simple solution of using a spousal RRSP.
Aravind Sithamparapillai is a financial planner at Ironwood Wealth Management Group in Fonthill, Ont.